United States: Cybersecurity: $ 1.4 million stolen not covered by fraud policy
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The United States District Court for the Eastern District of Pennsylvania recently determined that a $ 1.4 million wire transfer fraud was not covered by Ryeco, LLC, a fruit distributor’s commercial crime policy. Ryeco, LLC v. Selective Ins. Co., n Â° 2: 20-cv-03182 (ED Pa. May 13, 2021). A hacker in South Africa had gained access to Ryeco’s network, fraudulently applied the signature of the company’s vice president on wire transfer forms and emailed those forms to Ryeco’s bank, causing the transfer of the funds in a fictitious account.
Ryeco discovered the fraud, carried out a forensic investigation and obtained a denial of coverage from Selective Insurance Company. Ryeco then sued Selective for coverage and breach of contract, claiming that it was covered for loss under the âForged or Tamperingâ torts insurance policy it had purchased from Selective. This policy explicitly covered “losses resulting directly from the ‘forgery’ or alteration of checks, drafts, promissory notes or written promises, orders or similar instructions to pay a certain amount in ‘money’. . did not trigger the unambiguous terms of the policy, which covers âcheck, draft, promissory note or similar written promiseâ. The court agreed, differentiating e-mails and forged forms from checks and written promises. As such, he entered into summary judgment for Selective.
In particular, it was not disputed that if Ryeco had purchased a âFunds Transfer Fraudâ cover, it would have been reimbursed for its losses, a lesson to be learned in this atmosphere of increasing cybersecurity, phishing and ransomware attacks. .
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